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Economics 2.2.4
Economics- Edexcel 2.2.4
| Term | Definition |
|---|---|
| government spending | the total sum of money a government uses to finance its activities and functions |
| fiscal austerity | a policy approach that involves reducing government spending and/or increasing taxes in order to reduce budget deficits and debt |
| goal of fiscal austerity | to improve the financial health of a government by reducing its reliance on borrowing and stabilizing its debt-to-GDP ratio |
| recurring spending | one that occurs at regular intervals and is anticipated |
| capital spending | investment spending by government |
| GDP rises in economic recovery or boom | government automatically receives more tax revenue |
| why does the government receive a higher tax revenue in an economic boom or recovery? | people’s income tax(pay higher income tax)/extra revenue from corporation tax/higher revenue from VAT(spending more)/improved revenue from capital gains taxes (people buy more assets, pushing up prices and leading to rise in value) |
| why does the government spend less when the economy is expanding? | fewer people out of work(less unemployment benefits)/working households see pay increases(less spent on other forms of benefits)/people choose private healthcare or education(less spending on schools or NHS)/lower crime levels(less spent on police) |
| how does state-sector spending affect income? | welfare spending/jobs(creates multiplier effect from increase in state infrastructure spending)/subsidies keep prices low(real incomes improve) |
Created by:
jessharris
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